Articles

I Can’t Do Legitimate Leadership, And It’s Our Bonus System’s Fault!

August 15, 2016 - By Wendy Lambourne, Director, MA Industrial and Organisation Psychology, Registered Psychologist with SA Medical & Dental Council

art-bonus

In a previous article I discussed the idea, central to the Legitimate Leadership Model, that what one should hold people accountable for is their contribution. Not how hard they tried, not how long they spent our how much effort they put it, not even whether the result was achieved or not, but their actual contribution against an agreed standard.

More specifically, we need to determine whether the contribution made was on, above, or below the standard; understand why this was the case, and then reward, recognize, censure or discipline appropriately. (See the Legitimate Leadership Empowerment Framework at the bottom of this article).

Logically this all sounds fairly straightforward, but it’s also one of the components of the Legitimate Leadership Model which is most difficult to implement on the ground – and it is probably the one which most often results in people saying things like “I would love to do Legitimate Leadership but it’s just not possible in our environment because our rewards systems don’t work like that”.

The root of the problem: funding rewards from results

The issue to which people are referring here is actually the symptom of a deeper, and very practical, cause: most rewards systems are quite literally funded by the results achieved in the short-medium term.

Because this is the case, by far and away the easiest thing to do is to tightly couple reward to results – promise people a bonus on the basis of how much money there is in the bonus pool (i.e. the result). The second easiest thing to do is to leave the reward and the results coupled, but slightly loosen the coupling by adding in a component of individual performance based on contribution. The latter achieves some practical benefit over the former, but it still doesn’t work very well – especially when there is no money in the “bonus pool” (i.e. the collective result is poor) and a positive “contribution factor” applied to zero is still zero! Incidentally, if your “individual performance” factor is still based on a result, just an individual rather than a collective one, from a Legitimate Leadership willingness and loyalty point of view, you’re not really changing anything – you’re still prioritising what people are GETTING over what they’re GIVING.

So what can we do – if there’s no money, there’s no money!

Firstly, it’s important that this problem isn’t overstated (and I think it often is!). Remember that in any given leadership situation there are seven possibilities.

  1. Care
  2. Provide the means
  3. Build the ability
  4. Reward
  5. Recognise
  6. Censure
  7. Discipline

When you look at the above possibilities, it should be evident that having a misaligned rewards/bonus system is not completely disabling from a Legitimate Leadership perspective – it only actually affects one of the seven possibilities – reward. Moreover, solving the problem of rewarding people who don’t contribute has a relatively simple fix: introduce a factor to the calculation which says that the formula only holds if contribution and alignment to company values are evidenced in the process of achieving the result.

To solve the problem of rewarding a positive contribution when there is no money (i.e. the result was poor) is a trickier proposition, but it’s far from impossible – it just requires some creativity and an acknowledgment that there are things in this world which are not financial, but which are still very valuable. If your creative juices aren’t flowing then just type “how to reward without money” into Google.

Finally, in addition to the above, I believe that there is an organisation fix to this problem: it’s a combination of consistency and planning. If you reward for contribution consistently in both the good times and the bad, you logically fill the coffers during the good times – by not giving money away to people who didn’t contribute – and in so doing you have money in the bank to reward excellent contributions in the bad times when they come. Easier said than done, I know, and getting there would be even harder than being there, but while we’re implementing practical solutions to practical challenges, I think it’s good to bear the possibilities in mind.

The Empowerment Framework

 

Wendy Lambourne
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